Multiple Choice
In a standard journal entry, a debit is used to record which of the following effects on an account?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following accounts normally has a credit balance?
A
Accounts Payable
B
Equipment
C
Prepaid Insurance
D
Accounts Receivable
Verified step by step guidance1
Understand the concept of account balances: In accounting, accounts can have either a debit or credit normal balance depending on their type. Assets typically have debit balances, while liabilities and equity accounts usually have credit balances.
Identify the nature of each account listed: Equipment, Prepaid Insurance, and Accounts Receivable are asset accounts, which normally have debit balances. Accounts Payable is a liability account, which normally has a credit balance.
Recall that liabilities represent obligations the company owes to others, so their normal balance is credit because they increase on the credit side.
Confirm that since Accounts Payable is a liability, it normally carries a credit balance, distinguishing it from the asset accounts listed.
Conclude that among the options given, Accounts Payable is the account that normally has a credit balance.
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